Industry Overview - The Zacks Building Products - Miscellaneous industry is experiencing growth due to increased government infrastructure spending, which is driving demand for construction-related products and services [1] - Key players in the industry, such as United Rentals, Inc., Masco Corporation, Construction Partners, Inc., Hillman Solutions Corp., and Quanex Building Products Corporation, are well-positioned to capitalize on these trends [1] Current Challenges - The industry faces near-term challenges from high mortgage rates, affordability concerns, and inflation-related cost pressures, including tariffs on raw materials like iron, steel, and copper [2] - Despite these challenges, proactive cost management and pricing strategies are helping to mitigate headwinds [2] Industry Description - The industry comprises manufacturers, designers, and distributors of home improvement and building products, including ceiling systems, doors, windows, flooring, and metal products [3] - Companies also provide solutions for rehabilitating aging infrastructure and rent equipment to a diverse customer base [3] Future Trends - Strong global trends in infrastructure modernization and energy transition are expected to benefit industry players [4] - Improving residential construction markets are anticipated to drive growth, with builders cautiously optimistic for 2025 due to a lack of existing inventory [4] Operational Strategies - Industry participants are implementing cost-saving initiatives, including business consolidation and supply chain improvements, to boost profitability [5] - Strategic investments in new products and acquisitions are being pursued to supplement organic growth [5] Tariff Impact - U.S. tariff policies are increasing costs and disrupting supply chains, leading to heightened inflation [6] - Overall construction input prices were reported to be 1.1% higher in June compared to the previous year [6] Market Performance - The Zacks Building Products - Miscellaneous industry has underperformed the S&P 500 Composite and the broader Zacks Construction sector over the past year, losing 8.4% [12] - The industry is currently trading at a forward P/E ratio of 16.7X, lower than the S&P 500's 22.61X and the sector's 18.76X [15] Company Highlights - **Construction Partners**: Positioned for strong growth with a record project backlog of $2.84 billion and significant revenue growth from acquisitions [20][21] - **Quanex**: Benefiting from the acquisition of Tyman, contributing to a 67.3% year-over-year increase in consolidated sales [24][25] - **United Rentals**: Growth driven by strong demand in infrastructure projects and a stable customer sentiment, with a reaffirmed full-year guidance [27][28][29] - **Masco**: Facing a potential $400 million tariff headwind but expects to offset 50%-65% through pricing and cost reduction efforts [31][32] - **Hillman**: Aiming to reduce reliance on Chinese suppliers and maintain sales growth despite macroeconomic challenges [35][36]

Investors interested in stocks from the Building Products - Miscellaneous sector have probably already heard of Quanex Building Products (NX) and James Hardie (JHX) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank p ...

Group 1 - Quanex Building Products (NX) closed at $18.93, with a 9.3% gain over the past four weeks, and a mean price target of $37 indicates a potential upside of 95.5% [1] - The mean estimate includes three short-term price targets with a standard deviation of $5.57, where the lowest estimate of $31.00 suggests a 63.8% increase, and the highest estimate of $42.00 indicates a 121.9% surge [2] - Analysts show strong agreement on NX's ability to report better earnings than previously predicted, which supports the view of potential upside [4][11] Group 2 - The Zacks Consensus Estimate for NX's current year earnings has increased by 1.8% over the last 30 days, with one estimate moving higher and no negative revisions [12] - NX holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates [13] - While the consensus price target may not be a reliable indicator of potential gains, it does provide a directional guide for price movement [14]

Market Overview - The stock market is experiencing a new wave of uncertainty due to geopolitical tensions and weaker-than-expected economic data, particularly in U.S. retail sales for May [1][2] - The Israel-Iran conflict has escalated, contributing to investor unease [1] - The upcoming Federal Reserve meeting is a focal point, with expectations that weak economic data may lead to a more dovish stance from policymakers [2] Investment Strategy - In the current volatile market environment, a value investing approach focusing on fundamentally strong companies with reasonable prices is recommended [3] - Companies with high earnings yields are highlighted as potential investment opportunities [3] Earnings Yield Insights - Earnings yield is a key metric for assessing potential returns, calculated by dividing earnings per share by stock price [4] - A higher earnings yield may indicate undervaluation, while a lower yield could suggest overvaluation [5] - Comparing earnings yield to the yield on 10-year Treasury bonds can help determine investment worthiness [5] Screening Criteria - The primary screening criterion is an earnings yield greater than 10% [6] - Additional parameters include estimated EPS growth exceeding the S&P 500 and an average daily trading volume of at least 100,000 shares [7][6] - Stocks must also have a current price of $5 or more [8] Selected Stocks - Five stocks with earnings yields above 10% and strong growth potential have been identified: - **Aris Mining Corporation (ARMN)**: Expected earnings growth of 226% and 81% for 2025 and 2026, respectively, with a Zacks Rank 1 [10] - **Quanex Building Products Corporation (NX)**: Projected earnings growth of 19.6% and 14% for 2025 and 2026, respectively, also with a Zacks Rank 1 [11] - **Heritage Insurance Holdings, Inc. (HRTG)**: Anticipated earnings growth of 62% and 13% for 2025 and 2026, respectively, with a Zacks Rank 1 [12] - **Popular, Inc. (BPOP)**: Expected earnings growth of 17% and 20% for 2025 and 2026, respectively, holding a Zacks Rank 1 [13] - **Priority Technology Holdings Inc. (PRTH)**: Projected earnings growth of 108% and 34% for 2025 and 2026, respectively, with a Zacks Rank 1 [14]

Group 1 - Shares of Quanex Building Products (NX) have increased by 7.5% over the past four weeks, closing at $20.19, with a mean price target of $37 indicating a potential upside of 83.3% [1] - The mean estimate includes three short-term price targets with a standard deviation of $5.57, where the lowest estimate of $31 suggests a 53.5% increase, and the highest estimate of $42 indicates a potential surge of 108% [2] - Analysts show strong agreement in revising earnings estimates higher, which correlates with potential stock price movements, as the Zacks Consensus Estimate for the current year has increased by 2.8% over the past month [11][12] Group 2 - NX holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates, suggesting a strong potential upside in the near term [13] - The clustering of price targets with a low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement direction [9] - Despite skepticism around the reliability of price targets, the direction implied by them appears to be a useful guide for potential price movements [10]

Financial Performance - Net sales for the three months ended April 30, 2025, increased to $452.5 million, up 70% from $266.2 million in the same period last year[11]. - Operating income for the six months ended April 30, 2025, was $33.9 million, compared to $28.6 million for the same period in 2024, reflecting a 18% increase[11]. - Net income for the three months ended April 30, 2025, was $20.5 million, a 33% increase from $15.4 million in the prior year[11]. - Total net sales for the six months ended April 30, 2025, were $852.5 million, compared to $505.4 million for the same period in 2024, representing a 68.4% increase[104]. - Operating income for the three months ended April 30, 2025, was $40.9 million, up from $20.6 million in the same period of 2024, reflecting a 98.5% increase[105]. - The company reported a net income of $20.5 million for the three months ended April 30, 2025, compared to $15.4 million for the same period in 2024, indicating a 33.0% increase[105]. Assets and Liabilities - Total assets as of April 30, 2025, were $2.31 billion, slightly down from $2.32 billion as of October 31, 2024[9]. - Total liabilities decreased to $1.31 billion as of April 30, 2025, from $1.31 billion as of October 31, 2024[9]. - As of April 30, 2025, the total long-term debt was $746.4 million, compared to $737.2 million as of October 31, 2024, indicating an increase of about 1.5%[59]. - Total lease liabilities as of April 30, 2025, amounted to $215.3 million, an increase from $190.7 million as of October 31, 2024[51]. Cash Flow and Capital Expenditures - Cash provided by operating activities for the six months ended April 30, 2025, was $16.0 million, down from $36.9 million in the same period last year[15]. - Capital expenditures for the six months ended April 30, 2025, were $26.5 million, compared to $17.2 million in the same period last year[15]. - Cash used for investing activities increased by $9.1 million to $26.2 million for the six months ended April 30, 2025, primarily due to increased capital expenditures[173]. Dividends and Stockholder Equity - The company paid cash dividends of $0.08 per share for both the three and six months ended April 30, 2025[11]. - As of April 30, 2024, total stockholders' equity was $566,122,000, an increase from $545,554,000 as of October 31, 2023, reflecting a growth of approximately 3.3%[18]. - Common dividends paid were $2,649,000 for the six months ended April 30, 2024, consistent with the previous period, maintaining a dividend of $0.08 per share[18]. Segment Performance - North American Fenestration segment sales decreased from $307,769,000 in the six months ended April 30, 2024, to $285,359,000 in 2025, a decline of about 7.3%[33]. - The Tyman segment, acquired on August 1, 2024, generated $365,783,000 in sales for the six months ended April 30, 2025, contributing significantly to overall revenue growth[33]. - The Tyman segment reported net sales of $190.1 million for the three months ended April 30, 2025, following its acquisition on August 1, 2024[140]. Expenses and Charges - Selling, general and administrative expenses increased by $35.6 million, or 103%, for the three months ended April 30, 2025, compared to the same period in 2024[130]. - Interest expense surged by $13.0 million, or 1,367%, for the three months ended April 30, 2025, due to increased borrowings[144]. - The company incurred restructuring charges of $0.9 million and $8.8 million for the three and six months ended April 30, 2025, respectively, primarily related to workforce alignment costs[37]. Foreign Currency and Taxation - The company reported a foreign currency translation gain of $35.3 million for the three months ended April 30, 2025[12]. - The effective income tax rate for the six months ended April 30, 2025, was 18.2%, down from 21.6% for the same period in 2024[70]. - The effective tax rate increased to 23.5% for the three months ended April 30, 2025, up from 21.9% in the same period of 2024[145]. Acquisitions and Strategic Initiatives - The acquisition of Tyman plc was completed on August 1, 2024, with total consideration of approximately $504.1 million, including 14,139,477 newly issued common shares[38]. - The company continues to evaluate business acquisitions to expand manufacturing and distribution footprint and enhance product offerings[118]. - Integration of internal controls at the recently acquired Tyman business is in progress, with completion expected during fiscal 2025[197]. Risk Management and Market Conditions - The ongoing military conflicts in Ukraine and Gaza may lead to market disruptions and increased commodity prices, impacting operational performance[123]. - The company is monitoring tariff and global trade policies to mitigate potential impacts on business operations[120]. - The company continues to assess potential supply chain vulnerabilities and implement strategies to mitigate potential tariff impacts[191].

Financial Data and Key Metrics Changes - The company reported net sales of $452,200,000 for Q2 2025, a 70% increase compared to the same period in 2024, primarily driven by the Tymon acquisition [13] - Net income for the quarter was $20,500,000 or $0.44 per diluted share, compared to $15,400,000 or $0.46 per diluted share in Q2 2024 [13] - Adjusted EBITDA increased by 54.7% to $61,900,000 compared to $40,000,000 in the same period last year [14] Business Line Data and Key Metrics Changes - North American Fenestration segment net sales decreased by 5.5% to $151,000,000, with estimated volume decline of approximately 7% year over year [15] - European Fenestration segment revenue increased by 8.3% to $61,300,000, with estimated volume up approximately 9% year over year [16][17] - North American Cabinet Components segment reported net sales of $51,200,000, with estimated volume decline of approximately 3% [18] Market Data and Key Metrics Changes - In North America, volumes increased month over month in Q2, but year-over-year volume declined due to low consumer confidence related to higher interest rates [7][8] - European market conditions were negatively impacted by higher interest rates and geopolitical conflicts, but market share gains in specific product lines helped offset weaknesses [9][10] Company Strategy and Development Direction - The company is focused on the integration of the Tymon acquisition, expecting to realize cost synergies of approximately $45,000,000, a 50% increase from the original target [6] - The second phase of integration will focus on market expansion, operational optimization, new product development, and product line analysis [7] - The company aims to drive above-market growth and improve margin profiles, aligning with its profitable growth strategy [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in minimizing tariff impacts through localized supply chains and pricing mechanisms [8][9] - The company reaffirmed its net sales guidance of approximately $1,840,000,000 to $1,860,000,000 and adjusted EBITDA guidance of $270,000,000 to $280,000,000 for fiscal 2025 [21] - Management noted that the integration is shifting towards growth-focused projects that will drive margin expansion [11] Other Important Information - The company repurchased approximately $23,500,000 of its stock in Q2 and has $35,600,000 remaining on its share repurchase program [10][11] - Cash provided by operating activities was $28,500,000 for Q2 2025, down from $33,100,000 in Q2 2024 [19] Q&A Session Summary Question: Can you provide more details on raising the synergy target from $30,000,000 to $45,000,000? - Management indicated that the increase is due to operational efficiencies and additional sourcing synergies identified during the integration process [27] Question: Has the tariff issue created opportunities for domestic sourcing? - Management confirmed that the domestic manufacturing footprint has led to increased quoting opportunities and successful spot purchases, particularly in the cabinet segment [30][31] Question: Where in the Tymon portfolio have cost synergies been realized faster than expected? - The procurement side has shown more opportunities than originally estimated, along with higher synergies from corporate functions [38] Question: Is the $6,500,000 in intangible asset amortization a good run rate for the future? - Management confirmed that the Q2 figure is a reasonable run rate, with an adjusted D&A guidance of around $60,000,000 for the year [39]

Financial Data and Key Metrics Changes - The company reported net sales of $452.2 million for Q2 2025, a 70% increase compared to the same period in 2024, primarily driven by the Tymon acquisition [14] - Net income for the quarter was $20.5 million or $0.44 per diluted share, compared to $15.4 million or $0.46 per diluted share in Q2 2024 [14] - Adjusted EBITDA increased by 54.7% to $61.9 million compared to $40 million in the same period last year [15] Business Line Data and Key Metrics Changes - North American Fenestration segment net sales decreased by 5.5% to $151 million, with estimated volume decline of approximately 7% year over year [16] - European Fenestration segment revenue increased by 8.3% to $61.3 million, with estimated volume up approximately 9% year over year [17] - North American Cabinet Components segment reported net sales of $51.2 million, with estimated volume decline of approximately 3% [18] - Tymon business reported net sales of $190.1 million, with an estimated revenue decline of approximately 2% due to soft market demand [19] Market Data and Key Metrics Changes - In North America, volumes increased month over month in Q2, but year-over-year volume declined due to low consumer confidence related to higher interest rates [7][8] - In Europe, consumer confidence was negatively impacted by higher interest rates and geopolitical conflicts, but market share gains in specific product lines helped offset weaknesses [10][11] Company Strategy and Development Direction - The company is focused on integrating the Tymon acquisition, expecting to realize cost synergies of approximately $45 million, a 50% increase from the original target [6] - The integration strategy includes geographic expansion, operational optimization, new product development, and portfolio analysis, aligned with a profitable growth strategy [7] - The company aims to drive above-market growth and improve margin profiles [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in minimizing tariff impacts by localizing supply chains and utilizing surcharge pricing mechanisms [10] - The company reaffirmed net sales guidance of approximately $1.84 billion to $1.86 billion and adjusted EBITDA guidance of $270 million to $280 million for fiscal 2025 [22] - Management noted that the integration is shifting towards growth-focused projects that will drive margin expansion [12] Other Important Information - The company repurchased approximately $23.5 million of its stock in Q2 2025 and has $35.6 million remaining on its share repurchase program [11] - Cash provided by operating activities was $28.5 million, down from $33.1 million in Q2 2024, impacted by the integration of the Tymon acquisition [20] Q&A Session Summary Question: Can you provide more details on raising the synergy target from $30 million to $45 million? - Management indicated that the increase is due to operational efficiencies and procurement synergies identified during the integration process [26][27] Question: Has the tariff issue created opportunities for domestic sourcing? - Management confirmed that the domestic manufacturing footprint has led to increased quoting opportunities and successful spot purchases, particularly in the cabinet segment [29][30] Question: Where in the Tymon portfolio have cost synergies been realized faster than expected? - The main area of faster realization has been in procurement, with additional synergies identified in corporate functions such as finance and HR [37][38] Question: Is the $6.5 million in intangible asset amortization a good run rate for the future? - Management stated that Q2 is a decent run rate for intangible amortization, with a full-year guidance of around $60 million for adjusted D&A [39]

Core Viewpoint - Quanex Building Products (NX) reported quarterly earnings of $0.60 per share, exceeding the Zacks Consensus Estimate of $0.48 per share, but down from $0.66 per share a year ago, indicating a 25% earnings surprise [1]. Financial Performance - The company achieved revenues of $452.48 million for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 2.77%, and showing a significant increase from $266.2 million year-over-year [2]. - Over the last four quarters, Quanex has consistently surpassed consensus EPS estimates and revenue estimates [2]. Stock Performance and Outlook - Quanex shares have declined approximately 29.3% since the beginning of the year, contrasting with the S&P 500's gain of 1.5% [3]. - The company's future stock performance will largely depend on management's commentary during the earnings call and the revisions of earnings estimates [3][4]. Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $0.85 on revenues of $490.8 million, and for the current fiscal year, it is $2.55 on revenues of $1.84 billion [7]. - The estimate revisions trend for Quanex is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6]. Industry Context - The Building Products - Miscellaneous industry, to which Quanex belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8].

Financial Performance - Quanex reported net sales of $452.5 million for Q2 2025, a 70.0% increase compared to $266.2 million in Q2 2024, primarily driven by the Tyman acquisition[4] - Gross margin for Q2 2025 was $131.4 million, representing a gross margin percentage of 29.0%, up from 24.9% in Q2 2024[2] - Adjusted EBITDA for the three months ended April 30, 2025, was $61.9 million, with an adjusted EBITDA margin of 13.7%[2] - The company achieved a net income of $20.5 million in Q2 2025, compared to $15.4 million in Q2 2024[2] - Reported net income for the quarter was $20,515 million, with diluted EPS of $0.44, compared to $15,377 million and $0.46 in the same quarter last year[35] - Adjusted net income reached $27,887 million, with adjusted EPS of $0.60, up from $24,041 million and $0.73 year-over-year[35] - EBITDA for the quarter was $60,113 million, with adjusted EBITDA of $61,913 million, reflecting a significant increase from $31,531 million and $40,024 million respectively in the prior year[35] - Net sales totaled $452,478 million, compared to $266,201 million in the same quarter last year, indicating a substantial growth[35] - Operating income for the quarter was $40,921 million, showing an increase from $20,637 million year-over-year[35] Debt and Liabilities - Quanex's total debt as of April 30, 2025, was $785.0 million, with a leverage ratio of Net Debt to LTM Adjusted EBITDA decreasing to 3.2x[5] - Total liabilities remained relatively stable at $1,306,603 thousand as of April 30, 2025, compared to $1,309,042 thousand on October 31, 2024[22] - Net Debt increased to $722,351 thousand as of April 30, 2025, from a net cash position of ($932) thousand in the prior year, indicating a significant shift in financial leverage[29] - The company’s total current liabilities decreased to $244,365 thousand as of April 30, 2025, from $272,867 thousand on October 31, 2024, a reduction of approximately 10.5%[22] Cash Flow and Capital Expenditures - Cash provided by operating activities for Q2 2025 was $28.5 million, while free cash flow was $13.6 million[2] - Cash provided by operating activities for the six months ended April 30, 2025, was $15,987 thousand, down 56.7% from $36,945 thousand in the prior year[28] - Free Cash Flow for the six months ended April 30, 2025, was negative at ($10,557) thousand, compared to positive $19,762 thousand for the same period in 2024[28] - Capital expenditures for the six months ended April 30, 2025, were $26,544 thousand, an increase of 54.5% compared to $17,183 thousand in the same period of 2024[24] - The company reported a decrease in cash, cash equivalents, and restricted cash by $38,198 thousand during the six months ended April 30, 2025, compared to a decrease of $2,325 thousand in the prior year[24] Integration and Strategic Initiatives - The integration of Tyman is ahead of schedule, with cost synergy targets increased to approximately $45 million[1] - The company is actively pursuing strategic initiatives, including potential acquisitions, to enhance its market position[35] - Future outlook includes continued focus on market expansion and new product development to drive revenue growth[35] Segment Performance - The company reported a decrease in net sales of 5.5% in its North American Fenestration segment for Q2 2025[4] - The North American fenestration segment generated net sales of $151.026 million for the three months ended April 30, 2025, down from $159.774 million in the same period of 2024[42] - The international fenestration segment in the EU reported net sales of $61.257 million for the three months ended April 30, 2025, compared to $56.583 million in the same period of 2024, showing a growth of 3.0%[42] Expenses and Charges - Selling, general and administrative expenses for the three months ended April 30, 2025, totaled $70.333 million, up from $34.707 million in the same period of 2024[39] - The company incurred restructuring charges of $936,000 during the three months ended April 30, 2025, reflecting ongoing operational adjustments[39] - Cost of sales was $321,096 million, leading to a gross margin that supports the overall profitability of the company[35] - Cost of sales for the six months ended April 30, 2025, was $628.824 million, compared to $387.686 million in the same period of 2024, indicating an increase of 62.1%[40] - The company reported a gross margin of $223.698 million for the six months ended April 30, 2025, with a gross margin percentage of 26.2%, compared to $117.670 million and 23.3% in the same period of 2024[40]